Archive for March 14th, 2010

Some sense ‘Change is in the wind’; not the President Obama type, but pro & con initiatives & measures affecting every segment of HUD Code manufactured housing & the landlease community real estate asset class!

NEXUS is US!? Dictionaries list three definitions for this word, each characterizing one or another aspect of our unique, American born, ‘double dual industry’.*1 Nexus is ‘a means of connection, link or tie’; also, a ‘connected series or group’; and, ‘the core or center’. If you’re an entrepreneur businessman or woman with sole proprietorship, partnership, or corporate stake in HUD Code manufactured housing, and or ‘re salaried executives and employees of these businesses, partnerships, and firms! Bottom line? We’re in this predicament of historic proportions, together; and as ‘the nexus’ of manufactured housing & landlease communities (‘LLCommunities’), we must steer ourselves clear of this Near Perfect Storm, or as some opine, Grand
C o n s p i r a c y; or perish! But, how to do so?

Since we continue to await word, plans, and action from elected and salaried leaders of our two national advocacy bodies, within the Washington, DC beltway, we must, by default, rely on grassroots initiatives, and rumors of political and regulatory measures, for hope, if not faith, a new or revised Business Model is in the offing. A Business Model that’ll 1) attract favorable and consumer – favored transaction financing for our type factory – built housing, oft sited in professionally – managed, multifamily rental communities; and, 2) consequently, ‘Save Our Industry!’*2 In the meantime, we wait….

So, what is today’s ‘warp and woof’ of inter – segment threads connecting grassroots initiatives and rumors cum reality of political and regulatory measures?

Any talk of a new or revised Business Model, for this industry and asset class, will be for naught if the HUD Code manufactured housing industry doesn’t, once and for all, decry its’ recent past mantra: ‘Bigger Boxes = Bigger Bucks!’ Then, publicly and forthrightly, seize the initiative and proffer a workable definition and description of ‘affordable housing’ &/or ‘housing affordability’, applied to those features (e.g. low cost per square foot, transportability, energy efficiency, and more) characterizing contemporary HUD Code manufactured housing! *3

Next? Manufacturers of HUD Code manufactured homes. As has been pointed out in The Grissim Report, many many HUD Code housing firms went out of business during year 2009; or have been changed, maybe forever, by dint of merger and absorption (a.k.a. consolidation); and in some cases even new ownership, e.g. Fleetwood Enterprises now Fleetwood Homes, owned by CAVCO; & Champion Enterprises, acquired out of bankruptcy by three investors.*4 Only one mega firm remains intact, controlling 48+/- percent of the national market share of this unique type factory – built housing. So, how will all this pencil – out during the months ahead? Depends on several factors: availability of chattel (personal property) financing – or some other novel approach to this business perpetuation necessity; states implementation of the federal S.A.F.E. Act (i.e. Safe And Fair Enforcement of Mortgage Licensing); and, what restraint of trade measures one or another agency or department of the federal government applies, or does not apply, to the ongoing consolidation among HUD Code housing manufacturers.

Manufactured housing (nee street) retailers, whether independent or company stores. Had hoped to have Big News for you today, in this arena. However, due to a local power failure in central Indiana last Friday, I was unable to effect the telephone call many hope will spark a phoenix – like rejuvenation of the housing ‘distribution’ segment of our ‘double dual industry’. In the meantime, the in – house marketing of new Community Series Homes (‘CSH’), via Business Development Managers (‘BDM’), existent at several dozen HUD Code home manufacturing firms, is generally proceeding according to plan, with some plants – we’re told, shipping as much as 50 percent of their new home production into LLCommunities!*5 And frankly, as far as can be ascertained, ‘company MHRetailer stores’ are doing as well or poorly as their manufacturer bosses allow. It’s the plight of the 10 percent remainder of independent MHRetailers (as compared to the number selling Land & Home packages in year 2000) that’s motivated the birth of MHIDEA, to rally and organize these MHBusinessmen and women throughout the U.S.*6 Let’s hope some exciting Big News will headline next week’s Blog posting here at community-investor.com/blog! Where’s MHI’s National Retailers Council division in this mix? At present, they aren’t. All the initiatives cited earlier in this paragraph, e.g. CSH, BDM, & MHIdea, have been grassroots in nature. Hopefully MHI’s NRC division will climb aboard the MHIDEA bandwagon, if and when it pulls out of the barn to begin its’ work rejuvenating the distribution segment of the MHIndustry, and supplementing the marketing of new homes into LLCommunities!

Landlease community owners/operators. Much has been penned of late, about what is generally the healthiest of all MHIndustry segments. You’ve heard or read the drill. Today, nearly all owners/operators, certainly property portfolio ‘players’, actively market, sell, and frequently self – finance new and resale homes on – site! The Success Formula? Used to be simply, ‘Maximum Income + Minimum Expenses = Max ROI! Now there’s this corollary: ‘Recession proof property + Ability to add value = More than Survival; and if not greedy, Financial Success!*7 Sure, there’re properties (often larger ones) going back to lenders these days, either in forbearance (think ‘tied up in CMBSs’), or foreclosure, as REO (‘real estate owned) assets.*8 But there’s usually a sorry story behind those reversions, and much of the time it has to do with raising rental homesite rents to much higher than justified levels in the local housing market. *9 Besides the self – help measure(s) described in this paragraph, probably the best things the 50,000+/- property strong asset class has going for it, are MHI’s National Communities Council (‘NCC’) division, and the Urban Land Institute’s Manufactured Housing Communities Council (‘MHCC’) de facto Think Tank for both the HUD Code Manufactured Housing Industry & the LLCommunity asset class. And in the case of MHI’s NCC division, the sooner it hires a capable, asset class – experienced, highly motivated executive to devote 100 percent of his/her time to growing membership, and providing valuable services, to property owners/operators, the brighter our collective future will be!

And there’s more. Not even talked about in this blog, is the present need for MHIndustry & LLCommunity elected and salaried leaders to come together to parse some pretty serious questions. On the manufactured housing side; how much longer is it going to take for MHI to get off its’ duff and establish/nurture a viable secondary market facilitating the sale of resale homes? This means some difficult decision – making relative to how manufactured homes are valued for marketing and sale (e.g. ‘book value’ vs. ‘comp value’); encourage multilist use (Made easier, of late, by U.S. Supreme Court’s direction to National Association of Realtors® to open MLS to our brand of housing); as well as use of escrow accounts and realty – type ‘closings’ when consummating deals; and, probably most controversial of all, require home sales staffs to be licensed real estate salespersons and brokers, in states where they operate! Did I just hear a primal scream out there? I truly hope so….

It’s also high time to address the oft extreme disconnect between the 1) well – designed, attractive and professionally – managed, family and 55+ LLCommunities, and the 2) often old and functionally obsolete, unattractive, and poorly managed (if managed at all), multifamily hovels perennially giving our contemporary, quality, attractive, ‘green’, energy efficient, non – subsidized, transportable, factory – built housing a bad bad name, and ugly ugly social image in most local housing markets, on TV, in novels, and on Broadway! Are you on board to address the issues just described in these two paragraphs?

As a related aside; the serious questions described in the previous two paragraphs demonstrate why Manufactured Housing Association for Regulatory Reform (‘MHARR’) has not been, is not, nor will ever be – sans a major change to its’ restricted membership base (i.e. Non – manufacturers need not apply!), in a leadership position to Save Our Industry! Until, as MHARR puts it, aftermarket issues – like the ones just described, are resolved and corrected, manufactured home owners are handicapped when ‘buying up’ into a new home (i.e. One more new home shipment for a HUD Code manufacturer!), since their present dwelling has likely depreciated in value; and, why should lenders extend favorable chattel financing terms on home deals to be sited in substandard properties, poorly managed by passive investors, and subject to landlord whims? Keeping federal regulators at bay, protecting the intrinsic affordability of our unique brand of factory – built housing, is simply one, albeit important, part of our overall challenge!

Well, that does it for this week. Hopefully one or more of these revelations, and restatements of hard truths, has motivated you to become part of the solution to Save Our Industry! and not continue to sit back on your haunches as part of the problem. Don’t forget; if a business owner and or executive active in any segment of this ‘double dual industry’, NEXUS is US! So, as such, respond directly to this Blog with our ideas, comments and suggestions via one or another of the contacts listed in the End Notes to follow!

Next step? While we collectively continue to await ‘words, plan and action’ from MHARR & or MHI, perhaps we should begin talking now, about a third National State of the Asset Class (‘NSAC’) caucus.*10 What say You; at the Nexus?!

3. Much of this work has already been published in HOUSING AFFORDOGRAPHY, ‘Study of Affordable Housing Formulae & Measures of Housing Affordability’, PMN Publishing, IN, 2008; to wit: Housing Expense Factor, Housing Opportunity Index; Housing Wage; and other parameters.

4. The Grissim Report. (360) 683-1458 & http://grissimreport.com

5. If you’d like a FREE list of the 33+/- BDMs presently marketing HUD Code homes, in behalf of their firms, to LLCommunity owners/operators nationwide, call the MHIndustry HOTLINE: (877)MFD-HSNG or 633-4764 and request it. And while phoning, ask for Don Westphal’s seminal article describing the nature of CSH!

6. For more information, go to MHIdea.org (apology for incorrect web address cited in last week’s blog posting).

7. ROI: ‘Return On & Of Investment.

8. Commercial Mortgage – Backed Securities

9. For a Do It Yourself forms designed to calculate the appropriate rental homesite rent in any local housing market, using AMI (Average Median Income) and or AGR (Average Gross Income of an individual or household); as well as the ‘affordable’ and ‘risky’ price points on any new or resale manufactured home in or outside a LLCommunity, phone (317) 346-7156, and request FREE copies of the EQUALIZER worksheet, and the new ‘Ah Ha! & Uh Oh!’ multipurpose form.

10. Brief description and history of the National State of the Asset Class (‘NSAC’) caucus. An informal grassroots movement comprised initially of landlease community owners/operators; but now, also HUD Code housing manufacturers, who gather when there’re enough significant national issues afoot to warrant a one or two day caucus attracting seriously interested and already successful businessmen and women. First caucus was held 2/27/08 in Tampa, FL., and agreed on Five Action Areas (For a list of these foci, read 21st annual ALLEN REPORT, p. 6.). Second caucus, titled: an Historic SUMMIT Meeting, between LLCommunity owners/operators & HUD Code home manufacturers, was held 2/27/09 at the RV/MH Heritage Foundation Hall of Fame, Museum & Library facility in Elkhart, IN. That’s where those two major segments of the industry relearned, after a nearly 30 year hiatus, to work together to ‘sell new manufactured homes into landlease communities’! Can you imagine what might occur if we gathered, once again, to address the issues, questions, and challenges described in this blog posting?